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Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Optimization Based Approach forManaging Enterprise-Wide Business Planning
in a Petrochemical Industry
Bhieng Tjoa and Arturo CervantesOptience Corp.
andKagoto Nakagawa
Mitsubishi Chemical Corp.
Presented at 2004 AIChE Spring MeetingApril 27, 2004
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Outline
Ø Planning problem in petrochemical industry
Ø Business planning decisions/ issues
Ø Planning application requirements
Ø Example
Ø Summary
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Supply Chain Planning Problem
Environment for:- data access- decision supports:
- strategic planning- production planning- logistics
- business performance analysis
Suppliers Resources Inventory(Warehouses)
Customers
How to make the most profitable decisions?
How to reduce cost? How to improve productivity? How to improve business?
Inventory
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Horizontal Decision Complexity
Ø Horizontal interactions in supply chain decisions» Flexibility of operation options» Function of time
Plants Warehouses
Suppliers Customers
Material & Information Flow
Information Flow$$$ &
SalesInventoryProduction capacityFeedstock Logistics
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Vertical Decision Complexity
Optience SCMart Suitefor
Business Management
Information Access Point
Ø Vertical interactions in supply chain decisions» Consistency – Planning, Scheduling & Real Operation
OPERATION
StrategicPlanning
ProductionPlanning
ProductionScheduling
InformationDetails Benefits
Opportunity
Business Monitoring
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Petrochemical Business
Ethylene Plant
BTX Plant
Refinery
VCM
SM
TPA
BPA
Power Plant
PE
PP
PVC
PS
PET
PC
Others
Upstream Intermediate Downstream
ETY
PPY
BZTOLXY
Naphtha
Others
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Upstream/ Intermediate Business
Ø Supply chain planning decision at each business unit
Business Unit
Internal
External
Internal
External
External product purchases
Raw Materials Products
? : opportunity for optimization(decisions)
?
??
?
?
?
#, $
#, $#, $
#, $
#, $
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Downstream Business
Silos
Internal
Raw MaterialPurchasing
Raw MaterialStock
ProductionStep 2
Sales
?
? ?
? : opportunity for optimization(decisions)
Processgrades
ProductionStep 1
Silos
?
ProcessGrades
Sales
Salesgrades
?
Additives
Productwarehouses
On-Site
?
Off-Site
?
Customer 1
Customer 2
Othercustomers
Internaldemands
?
??
Logistics
External
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Planning for Integrated Petrochemical Business
Ethylene Plant
BTX Plant
Refinery
VCM
SM
TPA
BPA
Power Plant
PE
PP
PVC
PS
PET
PC
Others
Upstream Intermediate Downstream
ETY
PPY
BZTOLXY
Naphtha
Others
?
?
?
?
???
?
?
?
?
?
?
?
?
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Challenges in the integrated Planning Problem
Ø Problem characteristics• Upstream/intermediate processes
– Operation» Continuous» Few products - co-productions» Simpler product distributions
– Challenges» Non-linear – Blending/mixing, Yield performance» Combinatorial – Operational constraints
• Downstream processes– Operation
» Continuous/ batch» Many products – Product recipes/ Product allocations
– Challenges» Complex resource allocation, product inventory and distribution
management
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Business Planning Decisions (1/3)
Ø Raw material purchasing» What material, How much, From which supplier & When?
– Need to consider» Prices, logistics, inventory level, business policy
Ø Raw material storage» Storage management – today & future operation plan
– Need to consider» Allocation for new arrival and feeding to production lines/plants» Manage inventory level for all storages
Ø Production» What to make, How much, Which plant & When?
– Need to consider» Availability & capacity of plants, production efficiency» Product inventory & demands
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Business Planning Decisions (2/3)
Ø Product storage/ warehouses» What product, how much to keep, where?
– Need to consider» Demands, productions, logistics
Ø Logistics» Logistic cost management – today & future operation plan
– Need to consider» Demands, Inventory at each warehouse, production
Ø Sales» What product, how much, prices, where & when?
– Need to consider» Production & inventory» Logistics cost, business policy
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Business Planning Decisions (3/3)
All of the above decisions are related &have impacts on overall profit
Need to consider the trade-off of key decisionssimultaneously
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Issues in Planning Problem
Ø Understanding the impacts of uncertainty» Price changes» Demand changes» Capacity changes» Business policies
– Inventory– Product allocation
Ø Require sensitivity analysis» Create case & sub-cases
– Impact of changes on profitability
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
How do we make a decisionfor
Enterprise Wide Business Planning?
Need an optimization based application?What kind?
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Planning Application Requirements (1/2)
Ø Problem representation/ Modeling capability• Problem scope
– Modeling of upstream to downstream businesses» In the same environment as one model
• Modeling approach– Concise problem representation
» Unit operation based approach» Automatic mathematical model generation – data driven
– Multi-level modeling» Support multi-level model aggregation – different applications
• Modeling capability– Mathematical programming approach
» Model for linear, nonlinear & combinatorial problem(LP, NLP, MILP & MINLP)
» Robust optimization solution engines
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Planning Application Requirements (2/2)
Ø Data/ model management• Data I/O
– Efficient data transfer/ viewing» Open database architecture
• Data viewing/ analysis– Efficient environment for data viewing & analysis
» Rapid UI development environment
Ø Supporting workflow• Model/data – communication & sharing
– Multi-level application» Planning & Scheduling
– Cross-department» Purchasing, Planning, Sales, etc..
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Example of Applications
Ethylene Business Planning & Scheduling
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Ethylene Business Optimization Opportunity
A Business Scenario
Ethylene Plant Inventories
DemandsPPY
ETA
BBP
GSL
ETY
Business Policy:
Yield
NAP Cost
Heavy
Light
Feedstock Info
88
92
96
1 00
1 04
1 6 11 16 21 26
Day
Prod
uctio
n ta
rget
Ethyle ne
Propylene
ETY & PPY DemandsOptimal NAP ratio (L/H)?
Optimize Decisions – for now and future
Market DependentMarket Dependent Process Dependent
Resource Knowledge Business Policy
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Ethylene Plant – Process Flow Diagram
Fuel Oil
Furnaces
PrimaryFractionator
QuenchTower
Charge GasCompressor
Chilling
DemethanizerDeethanizer Ethylene
Fractionator
Depropanizer
PropyleneFractionator
Debutanizer
Hydrogen
Methane
Ethylene
Ethane
Propylene
Propane
B - B
Gasoline
Light Hydrocarbon
Naphtha
Feedstock
Products
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
OptimizationOptimization -- Ethylene Business PlanningEthylene Business Planning
Main Focus:
Find optimal feedstock purchases for production planning,for meeting production demands
Planning:- Aggregate model- Business policyanalysis
Ethylene Plant
PPY
GSL
ETY
Inventories Demands
Monthly
Interaction between sections
What to buy?
Feedstock Market
? ? ? ?
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
OptimizationOptimization -- Ethylene Production SchedulingEthylene Production Scheduling
Scheduling:- Accurate (rigorous) daily production model- Mixed Integer Nonlinear optimizer
Main Focus:
Find optimal feedstock allocation for daily production scheduling,for meeting production demands
Ethylene Plant Inventories
Demands
DailyInteraction between sections
Vessel scheduling Blending
How to allocate feedstock?
PPY
ETA
BBP
GSL
ETY
? ? ?
? ??
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Model Representation – Planning
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Model Representation – Scheduling
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Planning Application
Ø Planning result – summary
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Planning Application
Ø Feedstock purchasing & planning workflow
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Scheduling Application
Ø Scheduling result – summary
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Multi-Products Business Planning & Scheduling
Example – Polymer business
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Example: Multi-Products and Multi-Sites Planning
Rawmaterials
Productionlines
Plant productinventories
Distributioncenters
Demands
S1_1 S1_2
S2_1 S2_2
Plant 1
Plant 2
Warehouses
B1_1
B2_1
R1_1
R1_2
R2_1
R2_2
M3_1
M3_2
M3_n
Customers
T3_1
T3_2
T3_3
T1_1
T2_1
? ?
?
?
?
?
?
?
?
?
?
?
!
!
!?
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Example – Modeling in SCMart Modeler
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Business Performance Monitoring & Analysis
Example – Multi-products business
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Business Performance Monitoring
Ø Data sharing & performance analysis» Custom view for each department
SaleDept.
BusinessDept.
PlanningDept.
Databasesfor
Business Management
Optience Core
PurchasingDept.
ProductionDept.
LogisticsDept.
any other dept.
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View - Products
Ø Group by product class, product list
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View - Customers
Ø Group by regions
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View - Sales
Ø Total – by region
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View - Inventory
Ø Total, by warehouse, product class, product
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View – Shipping Cost
Ø By regions
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Sample View – Sales Analysis
Ø Top 20% most profitable products ($)
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Enterprise Wide Business Planning
Example – OA & PO business
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Planning – OA & PO Business
Ø Model representation
OA(Olefins-Aromatics)
PO(Poly-olefins)
PE
PP
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Planning – OA & PO Business
Ø Result – PE capacity (sub-cases)
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Planning – OA & PO Business
Ø Result – Profit
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Planning – OA & PO Business
Ø Result – on Naphtha selections
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Integrated Planning – OA & PO Business
Ø Result – OA demands
Strategic Solutions through Optimization ScienceCopyright, Optience Corporation 2004
Summary
Ø Enterprise wide planning – need one system– For business decision support applications
ERPfor
Business TransactionOPERATION
Optience SCMart Suite
Higher level systemfor
Business Management
StrategicPlanning
ProductionPlanning
ProductionScheduling
InformationDetails Benefits
Opportunity
Business Performance Analysis